Financial planning to live the lifestyle you want in retirement
Posted on December 14, 2023
Retirement should be something to look forward to after all your years of hard work. It’s the start of another new chapter in life and, with more free time and endless possibilities, retirement can give you some of the best years of your life.
Since the children have their own lives and the nest is empty, now is the perfect time to revisit and reassess the financial plans you may have put in place years ago to ensure they are still working hard for you. It's quite possible that they’re not, but with some careful financial planning and utilising effective financial strategies with JSA Accounting, you can not only rid yourself of debt but also maximize your wealth, protect your assets, and secure a comfortable retirement.
Some financial planning strategies for Wealth Creation
With the kids having moved out, you will likely find yourself in a different financial situation, and hopefully experiencing a drop in expenses related to supporting the family. With greater cash flow at your disposal, it may be tempting to treat yourself to the holiday of a lifetime or a new car. But while this sort of purchase might feel good in the short-term, your spare cash might be better utilised ensuring your long-term financial future is secure. Now is a great time to review where you stand financially and start focusing on optimizing your cash flow to build a healthy retirement nest egg.
In addition to the reduction in family expenses, any funds you may have put aside for unforeseen family emergencies can now be channelled back to help boost your savings, reduce that mortgage, or pay off any other outstanding debts.
Understanding your incoming and outgoing finances with thorough budgeting allows for smarter allocation of your money towards retirement savings, any investment portfolios, and debt reduction. Once you have calculated your annual expenses, you can estimate how much you'll need to save to support a 30-year retirement.
Obviously, this will vary depending on your situation and it’s best to keep in mind that this is just an estimate. You can get a more accurate picture by working with a financial planner who can run different scenarios to help you pinpoint your accurate savings target.
One of the big focus areas for people preparing for retirement is reducing the burden of debt. And paying off the mortgage (if you have one) should be your priority. Owning your home outright by the time you retire, or getting as close to it as possible, will mean your retirement income won’t need to go on paying interest that’s not tax-deductible (i.e. bad debt), and reducing this bad debt to near zero takes a huge financial load off your shoulders as you approach retirement. Since you won’t be earning income anymore, it’s important that you make your retirement funds last as long as possible.
By implementing a range of debt reduction strategies now, you can reduce financial stress and free up funds for other expenses in retirement. A financial planner can help you determine the best approach and plan to reduce your debt most efficiently.
Maximising your superannuation
Maximizing the potential of your superannuation is vital. We can help you review your superannuation on a regular basis, to keep track of its performance and ensure it is achieving your desired goals. Exploring different investment options within your superannuation fund can also help optimize your risk profile and strategies leading up to retirement.
Additionally, taking advantage of potential tax benefits can be an efficient way to boost your superannuation balance but making the most of these will vary on your situation. There are complexities surrounding strategies such as salary sacrificing (concessional contributions), after tax contributions, contribution limits, and the transfer balance cap so it is best to talk specifics with a financial planner to establish what approach will work best for your situation.
When you enter the empty nester phase of life, you’re likely to have around 15-20 years of work life before retirement, so it’s important to have a financial plan in place and consider maximizing your investments during this stage to create alternative sources of wealth.
There are many growth strategies and investment types that can be may be worth considering and each has its own risks and advantages. There are “leveraging” strategies (using low interest borrowing to invest), and various high-growth investments. These can generate better returns but can come with higher risk and volatility. Depending on your situation, risk profile, and portfolio diversity, it may be appropriate to have a small allocation in more aggressive investments.
However, it is best to discuss your options with a financial advisor who can help you explore investment strategies and options that fit with your financial plan and risk profile. Implementing wealth creation strategies wisely, will allow your nest egg to grow substantially in the years leading up to retirement.
Whilst not being seen as the “fun” side of retirement, estate planning is needed to make sure your assets are distributed according to your wishes after your passing.
Having an accurate and up to date Will that outlines your wishes is key for this process to occur smoothly. As long as your beneficiaries and any legal documents are accurate, the potential for legal complications is minimal. In addition, you might consider establishing a power of attorney, and a medical directive to ensure your financial and medical affairs are managed as per your desires. A qualified financial planner can guide you through your estate planning.
Insurance and protection
Having the right insurances helps protect against life’s unexpected curveballs and adequate coverage such as income insurance, life insurance, health insurance, and long-term care insurance, can be a helpful safety net when it’s needed. These insurances not only protect you, but also your loved ones, and help provide financial security and peace of mind if times get tough. A financial planner can help you review your insurance policies regularly to ensure that your retirement plan is kept on track, and that they’re working with you as you financially plan for your retirement.
Being an empty nester can bring a renewed sense of financial freedom with fewer expenses and responsibilities. However, now is the time to focus on you and work towards your ideal retirement goals. It’s so important to utilise these next few years wisely to enhance your chances for financial success because they’ll fly by before you know it.
Talk with a JSA financial planner today about maximizing your wealth for a comfortable retirement.
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